There's always risk in ANY investment, and I'm always reluctant to use the term "no brainer" myself. I am personally looking to get as rich as possible over the longterm while managing risk. Sometimes that means holding an investment for many years, sometimes it means holding for a few months, weeks, days, or even less than a day on the rare occasion. Sometimes it means carefully betting against a company I have a long position in as a hedge against its volatility, or even carefully totally betting against a company (or sector or industry) that is fundamentally in decline or broken - an advanced technique most average investors should probably avoid.
I have learned quite a bit over the last 21 years, and I've had a few companies I had $ in go bankrupt and cost me thousands in permanent losses. A well-diversified portfolio is essential. Buffett and Icahn may prefer to keep most or all of their $ in 10-20 companies, but I'm not as smart as they are. So I tend to usually own at least several dozen companies long, plus some commodities exposure, some puts / shorts as hedges, keep some cash set aside, etc. I'm currently long about 100 stocks and have a couple dozen put / short positions, plus about a half dozen commodities positions (gold, silver, oil, gas, etc). I like many companies, love a few, and am married to none.
It's true that oil and gas (exploration and offshore exploration in particular) are riskier than average and are also heavily tied to the prices of the underlying commodities, speculation, supply & demand, etc. That's why I say that even at this time when they appear to be poised for a comeback, you shouldn't have too much $ in energy (or anything else) overall, and you shouldn't have very much of that money in any one company.
It's been my experience that companies trading below double digits ($10 or more) are riskier on average than companies trading above $10. And companies trading for less than $1 are far riskier overall. I have occasionally owned small amounts of companies in single digits or pennies that produced a huge ROI, but the vast majority of companies trading that low are that low for good reasons, and are highly likely to stay below $1 or often even become worthless.
I would not personally label an oil & gas EP company with a 7 figure market cap, negative earnings and margins, a 15.5 debt / equity ratio, and that is trading for pennies on the pink sheets as "low risk". I'm not saying it's worthless, or that it won't necessarily go higher, perhaps even much higher eventually. But in my world it is far from "low risk".
As a purely hypothetical example for educational purposes:
Hypothetically speaking, an investor with a long time horizon of say 20-30 years or more, and a moderate to moderately aggressive risk tolerance, who is looking for longterm capital appreciation, who may have just rolled over a $100k 401k from a former employer into an IRA brokerage account or who may have just saved up that $100k and put it into a taxable account or whatever, and who won't likely need to pull any of that $ out until retirement might consider something along these lines...
Say perhaps roughly 15% or so in energy, spread out among perhaps a half dozen to a dozen companies. You might have $1-2k in a few onshore drillers, maybe another $1k each in a couple of offshore drillers, another grand or two in 1-2 servicers like Hal or Slb, maybe several thousand in a big integrated name like Exxon, and also perhaps a grand or 2 in a good transporter like KMI or BPL.
I'd say put no more than $100-200 or so of that $100k total and $15k of energy $ into something like STTX. If it goes to $80 from 8 cents, you made $10-20k. If it stays put, goes up very little, or goes bust, you're only tying up or losing a very small amount of money.
You'd probably want to keep at least 5% of your money in cash, perhaps another 5-10% in various commodities, and the other 70-75% largely in companies in other sectors and industries not directly related to energy - materials & industrials, tech, healthcare / biotech, consumer staples, etc, etc.
Regarding market timing aka "waiting", I wouldn't do it. If you have money to invest that you're not investing, I would at least start dollar cost averaging - putting a certain amount of cash into your investment accounts each week or month and investing that money. This has the built-in advantage of buying more shares of your investments when they are beaten down and cheaper, and fewer shares when they are higher priced.
I know people who are still "waiting for the bottom" for the last 6 years. They're either paralyzed by fear or think wrongly that they're smarter than everyone else. Anybody who tells you they're 100% sure of this or that should be ignored. The richest and smartest guys in the world readily admit that they don't know for certain what the market will do tomorrow or within the next quarter or year or whatever. They're largely or entirely "bottom-up" in most cases.
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) (Collins Business Essentials): Benjamin Graham, Jason Zweig, Warren E. Buffett: 9780060555665: Amazon.com: Books
